In January I'll be directing and part of my responsibilities is to find the sponsor for the show. I think this scares me more than anything. I hate selling/asking for money, and am bad at it. So my question is: Does anyone have a template letter they use when approaching a potential sponsor?  Everytime I try to write one it sounds so cheesey or car salesmenish (what can we do to put you in a sponsorship today?) Any tips are appreciated.

Some bragging is okay, but I agree with Debflo, frame it in a way that shows the benefits to potential sponsors.  Pointing out high ticket sales, ie large exposure through special announcements and program ads, loyal customers, they will be prone to help those who help their favorite theatre, etc.  The sponsors will also like to be associated with programs that make them look good.  They can claim helping great programs for education and such in their own annual reports.
It is sales.  But I think the more important thing to keep in mind can be to remember that their assistnace stops at writing a check.  More and more it seems that sponsors want some input in the product, avoiding edgy work, I have even seen try to dictate casting.  Sponsors are very helpful but keep them in their place.